Amartya Sen's Capability Approach and Its Message For The Residential Property Market In India

Proponents of human development in India often point out that we as a nation are obsessed with stories of the rich and the successful, but often ignore the wants and desires of the have-nots. Nobel-winning economist Amartya Sen's recent collection of essays on how we neglect the rest of India, puts forth the same argument. Free market economists often rebut his views and insist that this is an exaggeration.

However, there is more than a grain of truth in Sen's assertion.

Consider Sen's view that poverty is not merely an absence of income, but an obstacle to exercising one's capabilities. This is a view that perfectly applies to residential property markets in India. Residential inequality, (or simply put, the inequality arising out of non-ownership of homes) as many point out, leads to other forms of inequality that prevents low income individuals from exercising their capabilities. The affordable home segment in India is expected to cater to their needs. 

Capabilities, according to Sen's capability approach, refers to an individual's capability to have a high quality of life that is not measured by income, but by "beings and doings", like being in good health, and enjoying the basic necessities in life, and engaging in reasoning through education.

Shelter, for instance, is a fundamental human need. It is not merely that low skilled workers in India could have earned 10-20 times as much as they earn in Indian cities if they lived in the West. According to some estimates, it would take an average Indian 308 years of hard labour to buy a deluxe home in Mumbai, while it could take merely 42.7 years in Asian cities like Singapore. Exercising one's capabilities, thus, in the context of residential property markets, is among the most difficult in India.

Moreover, low income individuals everywhere in the world tend to compete for homes in the rental market, instead of buying them. But, the stringent rent control norms in India make them inaccessible to economically weaker sections of the society.

In India, tenants who benefit from rent control laws, live in regulated properties. The reason is that in Indian cities, there are stringent norms regarding upper ceilings on the amount landlords can charge tenants. Rent ceiling is not inflation indexed and the tenancy period does not end with the death of the tenant.

The tenants often belong to the articulate middle class. Many homes under rent control are in a dilapidated state because landlords do not have much to gain from renovating them. In Mumbai, for instance, rent control laws can make rentsone-thousandth or less of the prevailing market rates.

Moreover, unlike in most global cities, Indian local authorities have not attempted to redevelop such properties, lowering the stock of rental homes. This forces many low income individuals to live in slums and other unappealing parts of the city. With rent control laws in place, landlords can also afford to discriminate against prospective tenants because demand exceeds the supply.

Scholars have pointed out that much of the effects of residential inequality is seen in the inequality of amenities associates with residential property. These include the quality of air, water, and sewage. In Indian cities, the water supply, sewerage and the quality of air is poor, especially in areas (slums, chawls, roadside shanties etc) where low income individuals live.

This is true, even in cities like Gurgaon where there are efficient private sewage systems. The private sewege systems in Gurgaon, for instance, are not linked to official tanks, and are often dumped illegally. They are also beyond the means of people from the lower strata of the society.

Moreover, as transportation costs are high relative to incomes in Indian cities, low income individuals often have to live in cities where they often have to accept the tradeoff of living in smaller houses or lower quality houses if they have to live in the inner city.

This is not because of low income levels, because many residents of slums in Indian cities could have incomes that are much higher than that of average Indians. It is building height restrictions and restrictions on where to build and what to build, and the time-consuming regulatory processes that make dwelling units beyond them.

It is, indeed, true that the skewed residential property markets prevent many Indians from exercising their capabilities, one of which definitely is being able to buy or live in homes they can afford.